How shared equity works in the open market

Publised date : 01 Oct 2018

Many would-be first time buyers discover they can’t afford the home they really like on the open market. If that’s the frustrating position you find yourself in, help could be at hand… through the Open Market Shared Equity (OMSE) scheme.
Established by the Scottish Government, the scheme can help if you are a first time buyer looking to buy your main residence (not a property to rent to others), so long as you fall into one of the Government’s priority groups. These are buyers who are either:

  • Aged over 60
  • Renting from the council
  • Renting from a housing association
  • Are disabled
  • A serving member of the armed forces, or a veteran who has left service within the past two years
  • Or you are the widow, widower or partner of a member of the armed forces who died within the past two years, whilst still in service.

Since the scheme is aimed at households with low to medium incomes, you will be assessed to see if you qualify. You must demonstrate that you simply can't afford to buy a home that meets your needs without help from the OMSE scheme. If it looks like you could, then you won't be eligible.

How does it work?

Essentially, the Scottish Government will fund a proportion of your first mortgage, interest free, under a shared equity agreement. This is a legal contract, which means your name will be on the title deeds for your home, but there will be a 'standard security' on the property to protect the Scottish Government's share of the equity.

That means when you come to sell the home, you will need to repay the Government money, plus a proportion of any profit.

Say you buy a home worth £100,000 and the Scottish Government provides £20,000 towards the purchase. That’s 20% of the equity held under the standard security.

If you then sell the house for £110,000 a few years later, then the Government will be due £22,000 (20% of the selling value). That leaves you £88,000 (less your outstanding mortgage repayment) to invest in a new home.

Remember, the scheme can only be used to help you buy your first home, so where you move to next will need to be funded 100% through a personal mortgage.

If you qualify for OMSE, you will need to pay for the biggest share of equity in your home’s purchase price: this usually amounts to somewhere between 60% and 90% of the home's cost.

You can buy a bigger share of the equity in later years if your financial situation changes; but this must be done by buying at least an additional 5% in any particular year.

You can therefore build up your share of the equity, and ultimately cover 100% of the property’s value with your own mortgage. But each time you do this you'll also need to pay all the costs, including a current valuation, legal fees for changing the agreement, and any administration costs.

Your responsibilities

Because you will have 'complete title' to your home, from day one you'll also be the person legally responsible for paying for your:

  • Mortgage
  • Building insurance
  • Home contents insurance
  • Fittings and furniture
  • Heating, lighting and water bills
  • Council tax
  • All necessary repairs and maintenance costs.

Before you buy a house, the seller will give you a Home Report. You should read this carefully to make sure you can pay for any immediate repairs that are needed.

Maximum price thresholds

There are different threshold prices across Scotland, so before you apply to buy through the OMSE scheme make sure the home falls under the threshold price for your area.

'Golden share'

Although you can usually increase your share right up to 100%, there are some circumstances when the Scottish Government will insist on keeping a share of 10% of the equity value in your home. This usually only happens in areas where there are fewer affordable homes and it is called a 'golden share'.

You should check with your solicitor to see if your shared equity agreement has a 'golden share'. If it does, and you later want to sell your home, you must give the Scottish Government the first opportunity to buy your home back – at its current valuation at the time.

This helps ensure that homes in the area will still be available for other first time buyers.

More information

For further information on any of the schemes contact:


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